Bottled water companies ask for excise tax lift

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(Photo: Anteneh Aklilu)

A letter signed by the management of 33 local bottled water companies has been sent to the Ministry of Finance asking for the lifting of excise taxes on bottled water.
Currently around a 20 percent of excise tax is levied on packed waters. The basis for excise tax computation is the total cost of the product for items manufactured locally and CFI value in case of imported goods.
Getnet Belay, Board Chairman of Ethiopian Bottled Water and Soft Drinks Manufacturing association told Capital that excise tax which is applied to the bottled water is unreasonable.
“The government has not levied an excise tax on food because it is a necessity. However, the government collects excise taxes from the bottled water companies this a paradox. We need the government to lift it.’’
He added that though excise taxes are levied on the final product by taking their total costs into consideration, the government is levying taxes when the raw materials are imported as well on the final products of the manufacturers. This exposes manufacturers to unfair competition with imported goods, which are taxed once when they come into the country.
Capital asked Getnet Belay if the bottled water price will be decreased if the government lifts the excise tax.
“Why not, it will be decreased.” he said.
He added that the association is also asking the Standard Agency to allow bottled waters without neck sleeves.
“You know consumers drop the neck sleeves on the street which is polluting the environment. You don’t need neck sleeves for bottled water.”
Currently the government is planning to conduct a study in collaboration with the Ethiopian Revenue and Customs Authority (ERCA) to amend the Turn Over Tax (ToT), Value Added Tax (VAT) and Excise Tax.
The study is aimed at making an efficient tax system following the adjustments made along with the latest income tax and tax administration proclamations. In addition to this, the study will put into consideration the global market. As it stands the TOT rate is 10 percent for services and 2 percent for goods, while there is a 15 percent VAT on items sold. Excise tax on the other hand is 30 to 100 percent.
The study would also try to address the low level of tax contribution to the Gross Domestic Product (GDP), which currently stands at 13 percent – one of the lowest in the world.